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The battle over the fate of Yahoo! remained up in the air last night as the struggling Web icon intensified discussions about a deal with Time Warner’s AOL unit, while its main suitor, Microsoft, looked to partner with News Corp. in an effort to boost its chances of succeeding with its takeover offer.

As The Post originally reported, Yahoo! has been holding serious negotiations with Time Warner centered on combining its AOL Web portal with Yahoo! to create a new entity in which Time Warner would own roughly 20 percent.

According to sources familiar with the talks, the structure of the possible deal is complex and there are several issues, including the value of AOL, that have yet to be worked out.

Under the proposed plan, the deal, which wouldn’t include AOL’s dial-up access business, would involve Yahoo! using cash from the transaction and additional funds to buy back several billion dollars worth of its own stock at a price between $30 and $40 a share, sources said.

While the deal would not require a vote of Yahoo! shareholders for approval, the company plans to put any deal to a vote anyway, sources said.

Time Warner CEO Jeff Bewkes has been trying to unload the struggling AOL unit as it faces increasing competition from Google and others.

Meanwhile, as Microsoft gets increasingly frustrated with rejections of its $42 billion offer for Yahoo!, sources said the software giant is in discussions with News Corp. to structure a deal that would combine its MSN unit and News Corp.’s MySpace social networking site with Yahoo!. News Corp. publishes The Post.

Though those talks are at a sensitive stage and could fall apart, it would allow Microsoft to increase the overall value that it could provide to Yahoo!’s shareholders, sources said.

News Corp. has been in talks to swap MySpace for a stake in Yahoo! for some time, but could not come up with a valuation that would top Microsoft’s existing $31 a share offer, sources said.

“This has got some legs,” said one source close to the Microsoft-News Corp. talks.

Yahoo! yesterday also announced a two-week partnership with Google to carry some of the Web giant’s search ads in what sources said could be a first-step toward a deal with AOL.